As we come to the end of another trading year, it is that time when we make a few personal decisions.
- Will you reflect and review on your performance over the past year?
- Did you set goals for 2015 and if so, how did you do and why?
- Will you set new goals and a plan of action for 2016?
I know many traders! Some successful and many not so much, for various reasons. Of those who are successful, some do all three items above, and some do not.
I will suggest this, however, I know of no one who implements planning and analysis of the above (and the tools that allow them to do such things) who does not gain huge benefits from doing those things.
So where do you start?
First let's look back at 2015 and see what we can learn. To be able to do this effectively you will need more than just your beginning and ending balance. You will need the ability to review each of your trades. Do you have this ability? Some tools you can and should be using (especially as an options trader) are:
- Options Trade Tracking and testing software (OptionVue and OptionNet Explorer) are the two most widely used. But each provides the ability to track and review every trade you did and the overall results. OptionVue’s reporting and performance analysis is fantastic for this.
- Journaling software like OneNote and Evernote. These two products are fantastic for tracking your trades visually with snapshots as well as your thoughts during the trade. You can write down what you did and why, what reports might have come out or market conditions and how they might have impacted your trade. They are also very easy to search. I also keep separate notes about mistakes I made, so in one place I can review issues I had in the past year and plan to fix those in the coming year.
- Spreadsheet analysis to track your P & Ls, Greeks, margins etc. I find this very useful as well so I can easily compare important details about each trade along the way.
Without the use of these tools, review of your performance and the ability to learn and grow from your past is almost impossible.
Setting goals and planning
OK with that said, let's take a look at goals and planning for 2016. Without going into great depth, there are a few things that we can suggest.
First, let's make sure we have goals that are 100% in your control. What do I mean by this? Well, many traders start with a performance goal of making XX% for the year. The only problem with a performance goal is that it suggests that if you do everything right, you should be able to make your number. Unfortunately, that is not the case as we do not control the markets.
Take this example. You own a ski resort. Going into the season, you set goals for your resort and team to make new sales and profit goals higher than any past year. You commit new marketing and staff to support your goals, have a great plan and team in place ready to execute. One problem, though, there is a heat wave and snowfall comes in at record lows. So you can't attract skiers without any snow. Your problem is you made a goal when you did not control one key element of your business. In this case the weather. In our case, it is the markets.
Ok. With the above understanding, what should goal look like? It should be 100% in your control, it should be measurable, and it should be time-based. Maybe based on the thoughts above you could create a set of goals around tracking and journaling every trade on a daily basis. You could also have a goal to follow your trade plan flawlessly and give yourself a grade on how well you did this after you close each trade.
There are many, many great goals for traders but you do need to make this your own.
Now that we are heading into 2016, are you going to make a plan for the year? Are you going to do everything you can to make 2016 a successful trading year? Regardless of what path you choose, I wish you all the success for the coming year!